Sifting the Dot-com Wreckage for Lessons

Originally published April 2001, The American Editor (American Society of News Editors)

With interactive pet photo contests, multimedia fashion shows and slide shows of makeovers, the St. Louis Post-Dispatch’s postnet web site launched an ambitious new lifestyle section a year ago.

Soon after, it pulled the plug and put the effort into a new music channel where browsers could get profiles of local musicians, music clips and the skinny on where the Pennsylvania Slim Blues Band will play its next gig.

“We have a market for that. We can make some money and it’s more valuable to readers,” said online editor Jan Paul. The Post-Dispatch’s parent, Pulitzer Inc., didn’t stop there, subordinating the newspaper site to a regional uber-portal called STLtoday.com launched March 15. And the music channel? It’s still there.

Markets. Value. Money. A year after Wall Street began giving a Bronx cheer to the overvalued, over-hyped and overheated Internet economy, those words are front-of-mind for online managers in traditional news organizations, who wonder if the bubble has burst for them, too.

They see dot.com start-ups like Pets.com that have failed. They see online-only news sites such as apbnews.com imploding. They see thousands of online layoffs since December 1999 – more than 54,000 as of Feb. 7, according to The Industry Standard’s Layoff Tracker.

And they know in the “new” New Economy, investors want profits. Right now.

Some traditional media companies have responded in kind.

The Walt Disney Company closed its Go.com Internet portal, dissolved Disney Internet Group and laid off 400 people on Jan. 29;

CNN announced in January it would eliminate 400 jobs and consolidate its online operations with television and radio;

Tribune Interactive laid off 34 people and eliminated another 46 open positions in October;

KnightRidder.com laid off 68 people in December; New York Times Digital, 69 in January.

News Corp. shuttered its Digital Media division and cut half of the 450 online jobs at FoxNews.com and FoxSports.com in January.

NBCi laid off 150 in January; five months earlier, the company had laid off 170.

“Our restructuring began a long time ago,” said Bob Ryan, vice president and general manager of site operations for KnightRidder.com, which expects profitability by the end of 2002.

With the imperative to make their interactive operations profitable, what are the “traditional” media players to do? No one says the answer is “do less.” Everyone agrees the web won’t vanish.

“We’re trying not to make the mistake of giving up on the Internet just because Wall Street has,” said Mike Silver, vice president of strategy and development for Tribune Interactive, which predicts profitability in the second half of 2002.

The answers go to the fundamental issues newspapers have always grappled with. Can we do quality journalism? Can we make room for this medium? Is there time and money to prepare for the next new thing? Will people pay for content online? What is effective advertising in this medium?

Learning the best way to tell stories in a new medium

Bonnie Gross, executive producer for South Florida’s Sun-Sentinel.com, remembers her interactive teammates gathered around the white board for spirited brainstorming sessions five years ago.

What’s the best way to present this story? To engineer this new site we’re building? How will the reader react? And can we do it in an unconventional way? A Shockwave version of a strip club with a series on the sex industry? A fictional serial to generate online community?

Not every solution was good; some failed to attract enough traffic. But the opportunity was there to try, experiment, learn. Gross fears the emphasis on research and development may be over with the hastened imperative to be profitable.

“Resources are tight enough that you only think about doing the core mission,” Gross said.

Rich Gordon, associate professor at Northwestern University near Chicago and chair of its New Media Program, looks at the string of layoffs and reorganizations and wonders if perhaps the end is still to come.

“There may yet be more consolidation at the larger organizations to say they can automate more, streamline more,” Gordon said. “I wouldn’t put it past them to make long-term mistakes in the name of short-term economics.”

Online executives say a tighter reign on experimentation isn’t necessarily a bad thing, but they insist the age of R&D isn’t over. There are examples.

Silver points to the ChicagoTribune.com’s recent “Diary of a Start-up,” a 12-part series tracking business education company EVO Knowledge. (http://chicagotribune.com/tech/diary/). Readers and local experts offered their insights and advice to chief executive Tim Barry in a package that was interactive, self-contained and independent of the mother newspaper.

In another example, through October, washingtonpost.com followed the presidential debates with nearly immediate truth-squad reports. Producers mingled full-length debate transcripts with links to the “Debate Referee.” The referee’s black-and-white striped jersey highlighted well-sourced elaboration from earlier news reports, supplemental material and the candidates’ previous statements to correct or clarify their oral missteps.

And at the Sun-Sentinel, in an encouraging development for Gross, at least one major advertiser gave its blessing to a Sun-Sentinel content initiative – although it took awhile.

Almost since its first moments online in 1996, Sun-Sentinel’s online group worked with sister paper the Orlando Sentinel’s on a jointly operated site called Team Florida, dedicated to covering the state’s fiercely partisan college football teams.

Not long ago, AT&T stepped in as a major Tribune Interactive advertiser and insisted that the lion’s share of its page impressions go to Team Florida, Gross said.

The ad model continues

Online advertising is still the standard for online newspaper business models – in spite of Walt Disney Company chairman Michael Eisner’s comments to the Financial Times, declaring that the advertising community has “abandoned” the Internet.

“He’s wrong,” said Eric Scheirer, an analyst with Forrester Research Inc. in a recent report on how media companies should structure themselves online. “The Internet remains a key consumer medium and advertising revenues will rebound.”

Indeed, New York Times Digital spokeswoman Catherine Mathis told The Industry Standard the company remains “bullish” on online advertising, which contributes 87 percent of its revenues.

And at MediaNews Group, publisher of the Denver Post, executives are “refocusing on the classified verticals,” said Eric Grilly, vice president of interactive media. “Our local web sites are gaining traction in terms of traffic and revenue

Without giving details, Grilly said The Denver Post’s and Connecticut Post’s web sites are profitable.

Beyond advertising, there’s not much to turn to. New York Times Digital draws the balance of its revenues from fees for crossword clues, archives, e-mail and print classifieds that run online. A short-lived experiment had the Times selling subscriptions to its international edition. But besides The Wall Street Journal, try to find a newspaper willing to charge for online content.

“They don’t have anything anyone would buy,” said Mindy McAdams, Knight Chair professor in journalism technologies and the Democratic process at the University of Florida. “The only unique content any newspaper has is local news. And they invest the fewest resources in local news. It’s full of ads and wire copy, syndicated news — it’s full of stuff that’s generic.”

R&D beyond just content

Another big question: Are newspaper companies ready for more new media – e-books, wireless devices and broadband? How are they positioning their businesses – and their news operations – to feed these outlets?

In the Jan. 31 edition of his popular Stop The Presses column for Editor &amp; Publisher Online, Steve Outing noted that NBC recently urged employees to cancel their newspaper subscriptions and get their news online. He cited this as evidence that “the modern news company must disseminate its product to many different media platforms.”

Rich Jaroslovsky, managing editor of The Wall Street Journal Online, made the same point in a December speech at Columbia University.

Journal publisher Dow Jones “some time ago realized it wasn’t in the business of manufacturing a physical ink-on-paper product; its business is delivering exclusive business news and information to a global audience,” Jaroslovsky said.

Thus, the major media companies such as New York Times Digital, KnightRidder.com and Tribune are working with the likes of AvantGo and Vindigo to prepare them for the coming wave of wireless, on-the-go news.

But the bigger step, of course, is positioning the organization to get the best information in the best format to the best audience.

C’mon, people now, let’s get together

To that end, Outing cites CNN’s decision to scrap its separate online news division and declare that journalists must produce for multiple media. He lauds Media General’s Tampa Tribune, which runs a multimedia newsroom for television, radio, Internet and print.

“An argument can be made that new media sides needed to be independent for awhile,” Outing said. “But in the long run, it makes sense to evolve into a single news/information company.”

Forrester’s Scheirer applauds CNBC: “The structure of CNBC – in which the web site and the news channel share a newsroom, a production process and an editorial staff – is the right one.”

Rich Gordon has first-hand knowledge of the machinations as corporate media companies tried to adjust to new media. He left Knight Ridder’s Miami Herald for Northwestern a year ago for a string of sound goal- and career-oriented reasons.

But he concedes, “every 12 to 18 months we basically had to break everything and start over based on changes in strategy or changes in staff. I saw that coming again and I wasn’t sure I was ready to go through it.”

Indeed, soon after, the company spun KnightRidder.com into a separate business unit.

Ryan acknowledges that is the core of one mistake his company is trying to avoid.

“Our biggest challenge is understanding how the businesses are synergistic as opposed to being over concerned with how the businesses are competitive,” he said – still an issue even six years after newspapers started grappling with this.

Fixing that problem, and recognizing where newspapers fit into their audiences’ menu of media options, may help it cope with news events such as the Jan. 31 verdict in the Pan Am 103 bombing.

The huge news event broke in the wee hours of the morning eastern time – well after newspapers were off to their readers’ doorsteps. Morning news shows led with the breaking news. Morning drive radio did likewise. Cable news offered day-long reaction and analysis from resident pundits. Of course, the newspaper web sites broke the news and updated the story throughout the day.

Yet on Feb. 1, more than 24 hours later, The New York Times’, Los Angeles Times’ and Washington Post’s headlines began with the same two words: “Libyan convicted.” Papers of record, to be sure, but that headline had been inescapable the day before.

On the upside…

Grilly says he is not only starting to see profits at some of his group’s online sites – he starting to build. MediaNews publishes The Denver Post and its recently acquired Salt Lake Tribune, along with 47 other daily and 94 non-daily newspapers.

“We’re getting more aggressive because we’re starting to see the returns,” Grilly said. Aggressive, he means, in terms of hiring.

He acknowledges his company has been able to benefit from the reaches – some might say over-reaches – of other media groups. “I don’t fault them for doing it,” Grilly said. “They had the resources to do it and we got to learn.”

Hiring, by the way, has become an issue newspapers don’t have to struggle with the way they once did. Two years ago, traditional news organizations had to cope with a parade of departures from their staid companies to entrepreneurial start-ups offering stock options. Or they had to reinventing themselves with stock option plans of their own.

Now, the tide has turned.

“It’s more of a traditional job anymore,” said Dan Peak, vice president of Midwest operations for KnightRidder.com. “The stock options, the separate company – all those we put out as something special – they’re not quite as important as working for an established company.”